U.S. Stocks Tumble as Trump Threatens Higher Tariffs on China

Look, when people start to gamify investing, right? So when you think about people being rewarded with balloons and fireworks for trading, which we know is the more you trade, the worst offer you're going to be in the long run. I'm Joe Davis. And I'm Christine Kashkari. And this is season two of Better Vantage by Vanguard, an eight-part video podcast series hosted by custom content from WSJ and Vanguard. U.S. stocks sink after President Trump renews his tariff threats against China. Plus, MIT has become the first university to reject a proposal from the Trump administration. What happens next? The fact that MIT is first out of the gate and rejected it, I think, is probably a political problem for the Trump White House. And what they do about it is anybody's guess, but they tend to counterpunch hard. And Israeli troops retreat as the ceasefire takes hold in Gaza. It's Friday, October 10th. I'm Alex O'Soulet for The Wall Street Journal. This is the PM edition of What's News, the top headlines and business stories that move the world today.

U.S. stocks fell sharply on Trump's tariff threat. The NASDAQ led the losses, tumbling about 3.6%. The S&P 500 fell 2.7%, and the Dow dropped 1.9%. U.S. chip stocks were hit hard, with AMD falling 7.7%, and Broadcom dropping almost 6%. Regional banks slump, too, reflecting concern that an escalating trade war could further hit economic growth. WSJ reporter Jack Pitcher offered some insight on the market reaction. A lot of the enthusiasm we've seen over the last six months was about the idea that Trump didn't really mean what he said on the trade war. Deals were getting worked out and he wasn't serious about that. The reintroduction today of escalating tensions with China. sparked a lot of fears because a trade war is not just a one-way streets. We're opening up a path where China can introduce large new levees as well. And that has investors feeling some of the same fears that they did back in April.

In the world of commodities, metals are so hot right now. There's gold, which breached $4,000 an ounce this week, and silver neared a record high. Beyond the precious metals, industrial ones like copper, have been strong performers for the past few years. WSJ heard on the street columnist Jinju Lee writes that the value of aluminum, a metal used for everything from soda cans to electric vehicles, could be the next to pop, as its supply threatens to fall short of rising demand. Jinchu, I feel like I haven't heard as much about aluminum in the past few years as some of these other metals. Why is that? Metals like copper and gold have been in the headlines for different reasons, but mainly because their prices are rising so quickly. Aluminum's price has been going up this year, but not as much. And that's mainly because the metal has been very abundant for many years. China has made plenty of it using cheap coal. power for the last two decades. But you write that surplus is set to swaying into a deficit soon. What's going on there? So China has a self-imposed cap on aluminum production, and it's close to meeting that cap now. And demand for aluminum is set to grow at a healthy pace because it's a very important metal in the energy transition. It's used in electric vehicle, solar energy, transmission lines, and even data centers. And everywhere in the world, electricity is becoming a more scarce commodity. Producing aluminum is a very power-intensive process. Electricity itself is becoming the bottleneck for more aluminum supply. So what can producers do to increase the supply? They need cheap power, and that's very hard to get. Or they can recycle more aluminum. But the problem is there's only so much scrap metal can do to meet demand because certain applications of aluminum need very pure aluminum. How likely is it that the U.S. will start producing its own aluminum? In the U.S., it's really hard to imagine a scenario where there would be more aluminum production because electricity is so expensive. There's actually only four aluminum smelters left operating in the U.S. that just tells you how difficult it is. That was W.S.J. Heard on the street columnist, Jinju Lee. Thanks, Jinju. Thank you. The White House said today that it is conducting mass layoffs of federal employees in response to the government shutdown, which has now stretched into its 10th day. An official from the White House Office of Management and Budget characterized the retrenchment as substantial, and a White House official said it would affect thousands of federal workers. Officials said that employees had received layoff notices at the departments of Health and Human Services, education, commerce, treasury, and others.

The layoffs are an unprecedented step that follows through on weeks of threats meant to increase pressure on Democrats. At a news conference this afternoon, House Minority Leader Hakeem Jeffries put the blame for the shutdown on the president and members of his party. The American people are sick and tired of the chaos, crisis, and confusion that has been visited upon the country. by Donald Trump and Republican complete control of Congress. At a separate news conference, Senate Majority Leader John Thune said that passing a stopgap funding bill is the way to bring an end to the shutdown. We need five bold, courageous, Democrats with a backbone who are willing to take on their far left activist base, join us in passing this to do it any time. The Israeli military said today that a ceasefire in Gaza went into effect at noon local time. Israeli and Arab officials said that Israeli troops withdrew this morning from parts of the Gaza Strip, and Hamas said it would begin deploying internal security forces to the areas, a sign that the group is looking to reassert its authority in Gaza. Mediators say that the Israeli troop withdrawal starts a 72-hour window for the release of the hostages. Officials involved in the negotiations said final details are still being smoothed out between Israel and Hamas in Egypt, including the precise demarcation of the withdrawal lines, the release of Palestinian prisoners held by Israel, and control of the Rafa border crossing between Egypt and Gaza. Coming up, why MIT rejected a proposal offering funding advantages from the Trump administration. That's after the break.

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In France, President Emmanuel Macron has reappointed Sebastian LeCourne as Prime Minister, a post he quit less than a week ago. The move ratchets up fears that France has become ungovernable. In reinstating LeCornou, a close ally, Emmanuel Macron risks deepening the frustration of lawmakers in a fractious national assembly. It's also a sign of how Emmanuel Macron's options have dwindled as he seeks a government capable of surviving a no-confidence vote and passing a budget that narrows the country's gaping deficit. Today, the Massachusetts Institute of Technology became the first university to reject a sweeping proposal from the Trump administration, offering colleges funding advantages in exchange for far-reaching campus reforms. Doug Belkin covers higher education for the journal and is here to tell us more. Doug, let's start with this compact. It's called the Compact for Academic Excellence in Higher Education. What is it and what does it entail? This compact was... extended last week by the Trump administration 109 universities and essentially is saying we want to hold you to standards that we consider important around admissions, hiring student life in exchange for preferential access to federal funds. So MIT has rejected it. Why did they say they did that? MIT is really the first mover here and they've rejected it and they've said that if you're going to give grants based on the merit. of the science and the research they're trying to do, that really should be the only reason you're giving a grant. These things are extraneous and they're essentially going to get in the way of science. How does this compact and some of the issues that are coming up in it compare to other deals that the Trump administration has been seeking to strike with universities like Harvard and Columbia? At the foundation, the same sticking point exists. Universities take a lot of money from the federal government, especially research universities, but they have almost entirely been allowed to operate as they see fit. And this is the Trump administration saying those days are over. You guys have not governed yourself successfully, and we're going to put standards that you're going to have to listen to if you want to continue to get those federal funds. And the universities say if we lose our independence, we'll be seeding our ability to innovate because we won't be able to follow our academic interest. And that is a big problem for higher education. So what happens now in terms of these conversations with other universities and for MIT? The fact that MIT is first out of the gate and rejected it, I think is probably a political problem for the Trump White House. And what they do about it is anybody's guess, but they tend to counterpunch hard. If the other universities are looking for political cover, then MIT has provided some of that. The other issue is that MIT is an incredibly important institution. They do a lot of defense work for DARPA. There's a lot of things happening around MIT that are important to the country, to the administration. So this is a very sensitive and important matter that's just popping up. That was WSJ reporter, Doug Belkin. Thank you, Doug. Thank you.

And that's what's news for this week. Tomorrow you can look out for our weekly markets wrap up, What's News and Markets. Then on Sunday, we'll be discussing how Hollywood is reacting to artificial intelligence. From the shifting locations of where films are shot to so-called AI actors, we take a look at how Hollywood and the people who work there are keeping up and what the rise of AI means for content creation more broadly. That's in What's New Sunday. And we'll be back with our regular show on Monday morning. Today's show is produced by Pierre Bianameh and Rodney Davis with supervising producer Jana Haran. Michael LaValle wrote our theme music. Aisha El-Muslim is our development producer. Chris Zinsley is our deputy editor. And Falana Patterson is the Wall Street Journal's head of news audio. I'm Alex Osala. Thanks for listening. Harvard Business School Executive Education delivers a world-class learning experience that energizes aspiring and established changemakers. Prepare for the next elevation for your organization and for yourself. Learn more at HBS.me slash breakthrough. That's HBS.mE slash breakthrough. This podcast is brought to you by Federated Hermes. We put our investments through a ruthless vetting process because we don't like surprises and neither do our clients. Learn more at federatedhermes.com slash us. Investments are subject to risk and may lose value.